As the distressed asset market -- particularly for mortgages -- heats up, perhaps the single largest question is one of value. What are these assets really worth?
SuperDerivatives, a provider of risk management, revaluation and online options trading solutions, is aiming to answer at least one part of that question. The company said Tuesday that it will begin providing the liquidation price (or so-called "exit price") of all derivatives held within clients’ portfolios. Liquidation prices for the time of calculation, or for any retroactive dates, will be supplied as part of SuperDerivatives’ independent Portfolio Revaluation service, the company said in a press statement Tuesday.
The enhanced offering addresses an obvious market need: valuing portfolios that might be liquidated, and providing a fair value disclosure for investors that foresee a liquidation event. The demand for liquidation price-based valuations has been amplified during the recent financial crisis, as well as by specific regulatory requirements such as FAS 157.
SuperDerivatives said it will use its benchmark model for bid and ask prices to calculate the liquidation price for all types of financial portfolios, including those that contain illiquid OTC derivatives
Under the terms of FAS 157, firms are required to define the exit price of all instruments to calculate fair market value or "…the price that would be received to sell an asset or paid to transfer a liability." Additionally, during times of distressed market conditions, the exit price is usually the only price that matters to the portfolio manager looking to redistribute risk exposures.
"The recent market turmoil has highlighted the need for accurate, independent valuation," said Dani Weigert, head of revaluation services at SuperDerivatives. "Determining the liquidation price of derivatives, necessary for both regulatory compliance and to instil confidence in the investing community, can only be achieved with a combination of sophisticated modelling techniques and market data expertise."
"Today’s financial crisis has proven that none of the available models, or ‘standard analytics’ can be used for universally calculating the fair value of options."
For more information, visit http://www.superderivatives.com.

This month inHousingWire magazine

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